Friday, September 09, 2005

Swedish central bank sells gold

Riksbanken, the Swedish central bank, announces[Text is in Swedish], that it will sell 10,000 kilograms of gold, valued at approximately 1 billion Swedish Kronor ($133 million). The pretext is that they want a higher and more even yield. So they plan to invest it in foreign government bonds.

That is however most likely a smokescreen. While the gold price is volatile over a year to year basis, it is over a longer period of time a safe investment and given today's low bond yields likely to give at least as high a return. More likely is that this like other central bank gold sales is intended to keep down the price of gold, something which will give the many people who regard gold as a inflation indicator the impression that there is no inflation problem, particularly since the lower bond yields that will follow the reinvestment in gold will give some people the false impression of falling inflation expectations.


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